After being billed to be the biggest IPO stock for a technology company, the back alley discussions are now being put to the public light. These include charges of insider trading, overblown income projections, issues as to stock purchase confirmations as well as other issues are now being uncovered.
While these are in the now, the future, according to one hedge fund manager, is bleak for the company. According to Ironfire Capital founder Eric Jackson in an interview with Squawk on the Street at CNBC, “In five to eight years, they are going to disappear in the way that Yahoo disappeared. Yahoo is still making money, it’s still profitable, still has 13,000 employees working for it but it’s 10% of the value that it was at the height of 2000. For all intents and purposes, it’s disappeared.”
He points out that the emergence of the mobile web and Facebook’s inability to adapt to the new technology may be the cause for the eventual disappearance of this social media giant.
He adds, “The world is moving faster, it’s getting more competitive, not less. I think those who are dominant in their prior generation are really going to have a hard time moving into this newer generation. Facebook can buy a bunch of mobile companies, but they are still a big, fat website and that’s different from a mobile app.”
One of the recent moves of the company is the purchase of the popular mobile photo sharing application named Instagram for US$1 billion last April. The move was viewed as removal of a potential rival and together with the company’s recognition that mobile applications are a potential stumbling block for continued growth in the future.
During its IPO application, the company was required to identify thirty five possible “risk factors and complied with the requirement last February. In this list, the company admitted that its current ad-free mobile platform may pose problems in the future as more and more Facebook users as well as the web in general expands into the mobile realm.
Jackson categorizes Facebook as the second of the three generations of modern Internet companies. The first generation, with Yahoo and Google as main characters, were portals that categorized and simplified the access to the wealth of information available online. The second generation, such as Facebook and other similar sites, have made their mark capitalizing on the emerging social web. The third generation, according to Jackson, are companies that focus on leveraging and monetizing mobile Internet users.
He discusses, “When you look over these three generations, no matter how successful you are in one generation, you don’t seem to be able to translate that into success in the second generation, no matter how much money you have in the bank, no matter how many smart PhDs you have working for you. Look at how Google has struggled moving into social and I think Facebook is going to have the same kind of challenges moving into mobile.”